Classic Geometric Patterns and Narrow Range Setups

LLY: NRID7

Average Daily Range: 1.42

Today's %ADR: 58

Verify the pattern and set stops with candle / bar charts. Notice the proximity of the last four closes. Look at next lower and higher time frames. Check for earnings and/or pending FDA announcements.

Be careful and don't jump the gun.
 

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Breakdown! However, I confess, I had no idea how to trade this. I took a small loss on the first day on the first break below the previous day's low. The subsequent rally chased me out quickly the same day, only to se it close on the LOD.

The next day gapped up and ran an outside day the first hour! Are you kidding me. Moves like that make me put a lock on the trigger right away. So there was no way I was going to be in today's selloff.

If anyone has the key to this trade and wants to share I would surely appreciate it.
 

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Quote from inandlong:


If anyone has the key to this trade and wants to share I would surely appreciate it.
More...

You have to give it a time. It is oversold but has a strong resistance close by so you cannot really buy it right now unless you are scalping it . All you can do is to write put at level you want to own it , or if you want to sell it, write calls .

Best think is to leave it alone and go where you have much clearer picture.
 
I made two mistakes, and these are mistakes I have made before and most likely will make again. First I got locked in to the daily chart and didn't use the shorter time frames for reference, even though I had appropriate s/r drawn on the 60 minute chart the day I posted the daily chart. And second, I love looking at boats online. So when I exited that first trade, I let my focus go for the most part and looked at boats. Today when I remembered to pull up the hourly chart I saw how the trade had shaped up with the lines I had drawn several days ago.

Oh well... I suppose there will be another opportunity in another stock on another day.

:)
 

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Going into the last 30 minutes all three major indices have printed NR7's. The ID part is not very common with the indices. But if you take the time to look back over the last year... longer if you want.... you will see that very nice trading opportunities have availed themselves following index NR days.

Additionally, one should expect to find a good number of index components with NR's and NRID's today too.

Attached is an interesting chart I think. For those of you that just cannot believe that a moving average plays any part in trading or investing then this will clearly fall into the category of all time hoaxes... like man landing on the moon.

As always, blue is 40 periods and yellow is 20 periods. This is a month SPX chart.
 

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What was that?

I'm sorry... what?

Did someone say.... "dang!!!" :)

They don't all work this well, but if you just take the time to look back on the indices you see that many of them do work that well. What you should look at is the prevalence of true outside days (whipsaw) that follow NR days versus nice fat profit opportunity days that follow NR days.

Some of you are thinking, "yeah but today the Fed blah blah blah." If you look at any historical chart, can you tell me one day that you know the news of the day... except 9/11? One day!?!

I know that there are a lot of members who are trying to find something that will produce some decent wins. In the previous post I mentioned that the NR days on the indexes have produced some every nice opportunities. And I mentioned why. This is not proprietary stuff, new thought, mystical interpretation or calculation.

I'm posting the Dow because 99 out of 100 times when someone asks you "what'd the market do today", they aren't asking about the Nasdaq, the S&P, or the ES. They really don't know what they are asking about in truth, but quoting the DJIA will always keep the conversation lay-friendly.
 

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Here's BA. As I have it drawn it is a pennant. The length is ~11 days. Today is day #5.

The green line is an unfilled gap level.

Looking back on your own charts you will see that there tends to be some consolidation around major MA's.

Classically... one should expect a breakdown on good volume sometime during the next 4 days.
 

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Coincidence happens, I recognize that fact. With regards to stock prices, I don't believe much in coincidence though. But that's me.

I know from previous discussions that there are a lot people who just don't believe there is validity to the geometric patterns that occur during consolidation periods. However, when we take a look at the EOD chart for BA, and we have the benefit of a chart posted earlier today, the argument against geometric patterns is difficult to make.

Today's volume was just shy of the 200 day average daily volume, which represents about 9 months worth of trading. So we can't say that "only the little guy" is involved here.

Yet, for some reason, call it coincidence if you want, when the price of BA reached the lower leg of the pennant, buyers came in and the stock rallied almost 70 cents into the close. With the volume being virtually the normal volume for BA, I find it hard to believe that the little guy suddenly turned this stock around. In fact, if you look at the volume on the 15 minute charts, you will see that there was exceptional volume during the rally.

I don't know what this means for tomorrow, and I don't have to because the price and volume will tell me what's up when it occurs.
 

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Thanks jem, I appreciate it.

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Re: I wanted get this in as BA was at or near the HOD so far, but things were moving slow. Maybe it's this 386 computer I use.

The HOD is only 2 cents higher than the high 2 days ago. The opening volume is good but nothing stellar. As I am writing this the stock has backed off 20 cents so it appears I am hind-sighting this. Regardless, don't get suckered in by an early move.

The lines drawn are not static. They are just *guide* lines highlighting the recent price action during the consolidation. Trade smart and think it thru. It's Friday, how much participation will there be? Do not disregard the bar that makes up the base of this pattern in favor of the pattern itself. That bar's extremes remain the local S/R.
 
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